Oil - Black Gold or Curse?



The main EU-based oil companies are Shell, BP, Total and Eni. In 2006 their revenues together totalled $870 billion and their profits $74 billion. In terms of revenue Shell ranks 3rd, BP 4th, Total 10th and Eni 26th amongst the biggest companies in the world. Unfortunately, the activities of these and other oil companies are often not to the benefit of people in Africa. This article will review some of the most dubious actions of oil companies and their impact on Africans.



Gas Flaring


Gas flaring is a practice that oil companies use when oil deposits are mixed with gas and it is judged more profitable simply to burn off the associated gas rather than to capture it for utilisation or re-injection. The practice is highly controversial due to its detrimental impact on the environment and its emission of high levels of greenhouse gases. In the West 99 % of the gas is either used or re-injected into the ground, but in Nigeria for instance more than half of the gas is flared.


In Nigeria almost all gas flaring is carried out by local subsidiaries of five transnational corporations (TNCs) operating in joint ventures with the Nigerian National Petroleum Corporation (NNPC). Of the five TNCs, Shell plays the greatest role. Its subsidiary Shell Nigeria operates in a joint venture, which accounts for about 40% of Nigerian oil production. The others are Eni, Total, Exxon and Chevron.


Gas flaring causes harm to the health, environment and livelihoods of communities living near to the flaring sites. Flares contain a cocktail of substances such as benzene and dioxin which contribute to acid rain. Local people exposed to flaring suffer from respiratory problems and an increased likelihood of contracting cancer. In Nigeria's Bayelsa state alone flaring is suspected to cause around 50 premature deaths, 5,000 child respiratory illnesses and 120,000 asthma attacks a year.[1] Moreover it has a detrimental effect on agricultural production and contributes to climate change.


According to the World Bank, gas flaring in Nigeria emitted more greenhouse gases than all other sources of sub-Saharan Africa combined. Only in Russia is more gas flared than in Nigeria. Shell claims not to have enough financial resources to install the gas gathering equipment, which would make the flaring unnecessary, despite having made $31 billion profits in 2008. Shell currently flares gas at 1,000 sites in Nigeria.


Total and Eni admit that in 2006 gas flaring was responsible of 28% of the greenhouse gases they emitted. In Congo-Brazzaville Gas flaring levels at the huge onshore M'Boundi oil field, now operated by Eni, are extremely high (currently over 1 billion cubic meters per year) and have been a health and environmental hazard for years.[2]


Oil spills

According to available statistics, in the last 30 years more than 400,000 tons of oil have spilled into the creeks and soils of southern Nigeria. Some 70 per cent of the oil has not been recovered. Most of the 27 million people living in the Niger Delta depend on the water, fish and agricultural products of the Delta for their livelihood.


Oil spills significantly affect the health and food security of rural people living near oil facilities. In the period 1997 - 2006, according to its own annual reports, Shell Nigeria experienced about 250 oil spills each year. Others (Friends of the Earth Netherlands 2008)[3] fear that Shell is significantly underreporting the spills. A large number of the spills are caused by aging infrastructure and human errors on the part of the oil companies. Although Nigerian law clearly establishes the responsibility of oil companies in case of spills, hundreds of compensation claims brought before Nigerian courts, remained stuck in the Nigerian judiciary system. Shell does not invest enough money to meet international standards and to replace its aging infrastructure in Nigeria despite, as already mentioned above, having made $31 billion profits in 2008.[4]


Oil sands


Oil sands (also known as tar sands) are deposits of sand and clay saturated with bitumen. Bitumen is oil in a solid or semi solid state. Because it is in this less fluid state, the bitumen requires unconventional methods to get it to flow to the surface. Where oil sands are close to the surface the bitumen is excavated from the ground in open cast mines. More deeply buried bitumen requires the drilling of wells to pump it out. However, unlike conventional production, getting the bitumen to flow like oil requires injecting heat (usually steam) or solvents into the reservoir. This form of extraction requires power and steam generating plants, a large number of wells and extensive roads, pipelines and product collection tanks installed across a large area.


A third way is to convert bitumen into synthetic crude oil, through a series of energy intensive processes before refining it into petroleum products. The production of a barrel of tar sands bitumen is 3-5 times more intensive in terms of Greenhouse Gas emissions than the production of a barrel of conventional oil. In Africa there are significant quantities of oil sands in Congo-Brazzaville and in Madagascar.


In 2008, Eni signed agreements to spend $3 billion on developing oil sands, located in the Congo Basin in the Republic of Congo, the second largest area of tropical forest left in the world and a vital carbon sink. Eni's own studies reveal that the oil sands exploration zone comprises up to 70% primary forest and other highly bio-diverse areas. It also includes human settlements. There has been no meaningful engagement at local or national level by Eni or the government with Congolese citizens about the projects' potential fiscal, social and environmental impacts.


Shady business with corrupt governments


In Africa, oil still tends to be a private financial reserve for the ruling governments and strongmen and not a source of economic and social well-being of the citizens. In Nigeria for instance, local communities have no legal rights to oil and gas reserves in their territory. The Federal Government allocates permits, licences and leases to survey, prospect for and extract oil to the oil companies, who are then automatically granted access to the land covered by their permit.


Oil makes up to 80% of Nigeria's budgetary revenues and 95% of its foreign exchange earnings. Nigeria is the eighth-largest oil producer in the world and accounts for the production of about 4% of the world's crude oil. Oil and gas operations are carried out on about 50% of the territory of the Niger delta. This oil richness has however not led to an increase in the living standards of the local population. The percentage of the population living in poverty grew from 28% in 1980 to 66% in 2000.


The people of the oil-producing areas of the Niger Delta have watched for more than half a century while oil companies, politicians and government officials get rich from the 'black gold' extracted from their land. Meanwhile they have seen few if any benefits. A lack of transparency in the award of compensation and clean-up contracts has fed inter- and intra- community tensions and conflict. Communities are often seen and treated as a 'risk' to be pacified rather than as stakeholders with critical concerns about the impact of oil operations. Some companies have effectively paid communities and youths off, hoping to prevent protests. Another strategy has been the deployment, by government, of heavily armed security forces. Protests by local communities about the oil industry are frequently met with reprisals characterized by excessive use of force and serious human rights violations.[5]


Oil accounts for around 90% of Congo's export earnings, about US$4.4 billion in 2008. Yet after decades of conventional oil production, 70% of the population lives under the poverty line. In terms of energy access, barely a quarter of people enjoy secure access to electricity. Civil society activists have long campaigned to clean up the country's public finances and ensure that its natural resource wealth goes to poverty reduction. Mismanagement of this wealth by corrupt local elites, with the complicity of corporate interests, has been extensively documented.

The aforementioned agreements made between Eni and the Congolese government have not been disclosed due to a confidentiality clause in the contract. Research has revealed an almost total lack of public awareness of the investments in Congo. [6]


Uganda's recent oil discovery is already attracting major players like Eni, Exxon Mobil, Total and the China National Offshore Oil Company. Concerns have been raised by various government officials and civil society organisations (CSOs) over the fairness of the deal after details emerged that President Yoweri Museveni held direct talks with the companies without including government agencies. Extensive corruption and a lack of accountability in Uganda could turn the country's recently discovered oil reserves into a curse rather than a blessing, the World Bank warned. Earlier this year the government of Uganda signed a deal with the British company Tullow Oil, which contains a specific clause allowing the company to practise gas flaring.[7]



Thomas Lazzeri


[1] Stockman, L., Rowell, A., and Kretzmann, S., 2009, Shell's Big Dirty Secret.

[2] Heinrich Böll Stiftung, 2009, Energy Future? Eni's new investment in tar sands and agro-fuels in the Congo Basin

[3] Steiner, R., 2008 Double standards?: International Best Practice Standards to Prevent and Control Pipeline Oil Spills, Compared with Shell Practices in Nigeria

[4] For more information on oil spills also see Holding Shell accountable, 2010, at http://www.aefjn.org/index.php/74/articles/holding-shell-accountable.html

[5] Amnesty International, 2009, Nigeria: Petroleum, Pollution and Poverty in the Niger Delta

[6] Heinrich Böll Stiftung, 2009, Energy Future? Eni's new investment in tar sands and agro-fuels in the Congo Basin

[7] BBC News, 2010, Oil deal 'damaging for Uganda'

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